Corbett Considers Removal of Oil Tax Cap

The oil franchise tax in Pennsylvania is applied to the first $1.25 of every gallon sold and adds a maximum of 20 cents to the price. Gov. Corbett says that cap might be lifted.

By Melissa Daniels | PA Independent

HARRISBURG — Uncapping an oil tax on the wholesale price of gasoline isn’t out of the question as Pennsylvania plans to fund a major transportation overhaul, Gov. Tom Corbett said.

But he wouldn’t say whether he thinks it would lead to increased gas prices for Pennsylvania’s drivers.

Oil pricing isn’t “quid pro quo,” the governor said.

“When the oil companies are doing this, they look at the cost across the entire country and all multiple factors, not just one oil franchise tax here or over there,” Corbett said to reporters Thursday.

The oil franchise tax is a portion of the state’s gas tax applied to the first $1.25 of every gallon sold at the wholesale level.

Out of the 32-cent-per-gallon gas tax, roughly 20 cents of that comes from the oil franchise tax.

Corbett called the cap, which was set in the 1980s, “artificial.” He said removing it doesn’t equate to a tax increase.

Uncapping the oil franchise tax is a key part of revenue plans in the state’s Transportation Funding Advisory Commission report, a blueprint for a transportation funding policy in Pennsylvania released last year.

Doing so could raise more than $1.3 billion, according to the report, which is central to the plan. That estimate makes up a significant portion of the $2.5 billion in annual revenue, which could be used to fund much-need improvements to the commonwealth’s roads and bridges.

“Removing the ceiling would significantly increase revenue to PennDOT, municipalities, the Pennsylvania Turnpike Commission, counties and the Department of Conservation and Natural Resources,” reads the report.

That report was released in August 2011. Since then, lawmakers have pointed to the administration to take the lead on a plan.

Their wait may be ending, as Corbett said a plan would precede the budget proposal in the first half of 2013.

Corbett wouldn’t give details on what that plan entails, or say if uncapping the franchise tax is key to the plan.

“Everything in the TFAC is under consideration,” Corbett said. “You have to find revenue.”

Jim Lardear, director of public affairs for AAA Mid-Atlantic, said, because of the way oil prices have been fluctuating, consumers in Pennsylvania may not see any noticeable increase in gas prices if the tax were uncapped.

Other states, such as Virginia and Maryland, have had similar considerations, he said.

“I think this is not necessarily Pennsylvania’s problem alone,” he said. “Across the region I think we’ve underfunded transportation, we’ve allowed things to deteriorate rather than invest in them.”


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